Nonlinearity in the Indian commodity markets: evidence from a battery of tests

Tarun, Soni

doi:10.1504/ijferm.2013.053714

Cited by 3 publications

(4 citation statements)

References 41 publications

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“…Results also show that cumin, pepper and guar seed futures markets are yet away from its role of providing informational incentives to the farmers. The findings of guar seed are in line with the argument of Soni (2013a, b). It is also evident that only in soy oil the futures spillover effect is much more than spot spillover effect.…”

Section: Resultssupporting

confidence: 82%

“…Sehgal et al (2012) confirmed the price discovery by futures markets for agro commodities except turmeric. Soni (2013a, b) suggested that guar seed futures market is inefficient and biased in both short and long-run, which might be caused by over speculation or market manipulation. Soni (2013a, b) provided an argument on the nature of Indian commodity futures markets.…”

Section: A Brief Literature Reviewmentioning

confidence: 99%

“…Soni (2013a, b) suggested that guar seed futures market is inefficient and biased in both short and long-run, which might be caused by over speculation or market manipulation. Soni (2013a, b) provided an argument on the nature of Indian commodity futures markets. He confirmed that non-linearity exists in metal and energy markets, contradicting unpredictable criterion of weak-form efficient market hypothesis, and conditional heteroscedasticity is the main reason behind non-linearity in metal indices.…”

Section: A Brief Literature Reviewmentioning

confidence: 99%

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Do seasonality, break and spillover effects explain commodity price volatility

Maitra

2018

JADEE

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Purpose The purpose of this paper is to understand the volatility in commodity futures and spot markets. The study starts with a few questions: first, the effect of seasonality on the volatility is studied. Thereafter, the presence of structural breaks in the variance is identified. At last the seasonality, structural shifts and spillover effects are examined together to find out their effects on volatility. Design/methodology/approach The methodology heavily employs econometric tools and techniques. The monthly seasonal dummies are incorporated to identify the effects of seasonality on volatility. Then, the presence of break in volatility is tested by cumulative sum of squares (CUSUM test), followed by generalized autoregressive conditional heteroscedastictity and EGARCH models are measured by including seasonal dummies, break dummies and the residuals of other market in the variance equation to determine spillover effects. Findings It is found that the effects of seasonality on volatility cannot be ignored as the effects are significant. The presence of asymmetry is detected in all the commodities. The presence of seasonality and structural breaks in the variance equation are statistically able to reduce the volatility but the magnitude is very negligible with an exception in cumin futures markets. Bi-directional volatility spillover between futures and spot markets is observed in all the commodities and the effect of spillover is more from spot markets to the futures markets. Research limitations/implications This study is limited to a few agro commodities which are well traded. This study could have been extended to the other thinly traded commodities. This study has also taken only near month futures contracts as it contains more information but the same could have been studied by taking far month contracts also. Originality/value The present study attempted to understand the conjugated effects of seasonality, structural breaks and spillover on volatility of commodity markets which is not apparent in the previous studies. This study has also employed methodological rigor to identify the breaks in the variance equation. In addition to this it has also investigated whether Indian commodity futures markets are informationally more efficient than the spot markets.

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Section: Resultssupporting

confidence: 82%

Section: A Brief Literature Reviewmentioning

confidence: 99%

Section: A Brief Literature Reviewmentioning

confidence: 99%

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Do seasonality, break and spillover effects explain commodity price volatility

Maitra

2018

JADEE

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“…"Performance of Commodity Derivatives Market in India by using growth in volume and value of commodity derivatives market and found the linearity in growth trend" [6,7]. The presence of nonlinearity in returns is considered as evidence against the efficiency of Indian commodity markets theory which characterizes data as random walk or more strictly a martingale [8] and confirmed the long run efficiency of commodity futures prices and inefficiency of futures prices in short run [9]. Most of the studies conducted by many researchers focused on impact of futures on volatility, risk management, price discovery, hedging, and market efficiency [10,11] and relation between return and trading volume, leadlag relationship between trading activity and cash price volatility before and after introduction of futures market, but no study was found with regard to assessing the trend in crisis period and future prospects on performance of the market.…”

Section: Introductionmentioning

confidence: 99%

Time Series Analysis of Spot and Future Commodity Market in India During Covid – 19

Kalaiarasi,

Rohini,

Palanichamy

et al. 2023

AJAEES

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Derivatives are innovative financial instruments in the 21st century to help the market participants in mitigating the risk. Commodity derivatives are not new to the world, but reentered with new face into the fray. In India, derivatives are introduced at first on index and followed by securities and commodities phase wise for the betterment of the markets and the price discovery. The present study explores the association and trend between the Spot and Futures Commodity Derivatives Market in India before and during the Covid – 19 pandemic. The study uses descriptive, trend analysis and correlation analysis. The analysis done by using the MCX four major agriculture and non-agriculture commodities such as Cotton, Mentha oil, Crude oil and Natural gas spot as well as future price. Indian commodity futures market can be used as hedging tool with financial instruments for diversifying the risk during crisis period.

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